Contributor: Paul Oehrlein, CFA
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The Long Right Tail: Asymmetry in Single Stock Collars
As we saw with SpaceX in June, a number of larger IPOs on the horizon could drive single-stock hedging demand from allocators. While there are various ways to hedge, option markets were quick to develop and have often been the preferred hedge expression, with zero-premium collars[1] being particularly popular. Investors may be surprised by the…
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Not All Gains Escape Gravity: A Look at IPO Lockup Risk
With the landmark SpaceX IPO in June and several additional mega-cap issuances anticipated over the next year, NISA has observed significant interest around the mechanics and market implications of large-scale public offerings. Considering SpaceX had a market cap of nearly $3 trillion, this single investment represented a material portion of private equity exposure for many…
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Liquid Complements to Private Credit: A Three-part Series (Part 3)
Part 3: Mitigating the Cost of Private Credit’s Illiquidity The Role of HY CDX as a Private Credit Proxy Key Takeaways from Parts 1 and 2 In the first two installments of this series, we highlighted a few critical observations: Investor Headache: Managing Private Credit Exposure Beyond fees and expensive leverage, private credit’s illiquidity…
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Liquid Complements to Private Credit: A Three-part Series (Part 2)
Part 2: The Private Credit Premium is Real. The Performance Drag of Leverage? Also, Real. Net Return From Leverage in Private Credit Strategies In our prior paper, we compared private-market indices with comparable credit-quality public-market indices. Importantly, in an effort to present a fair and balanced comparison, we adjusted the returns of the various indices for differences in duration, leverage and pricing conventions (mark-to-market…
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Liquid Complements to Private Credit: A Three-part Series (Part 1)
Part 1: The Private Credit Premium is Real Measuring the Illiquidity Premium Institutional interest in private credit[1] has expanded meaningfully in recent years, driven by the potential to capture an illiquidity premium and access a broader range of issuers than traditional public capital markets alone can provide. And while it is tempting to join the…